The Financial Markets Agree With President Obama and Disagree with Paul Ryan

Monday, 28 January 2013 06:00

It probably would have been useful to remind readers that Representative Paul Ryan's claim that country is facing a fiscal crisis is sharply at odds with the views of market participants in a NYT article reporting on his latest interview. The article quotes Ryan:

"I don’t think that the president thinks that we actually have a fiscal crisis, ... He’s been reportedly saying to our leaders that we don’t have a spending problem, we have a health care problem. That just leads me to conclude that he actually thinks we just need more government-run health care.”

Of course the fact that investors are willing to lend the U.S. government trillions of dollars for long periods of time for interest rates of less than 2.0 percent indicates that the markets do not believe the United States has a fiscal crisis. Also, it is a fact that if the United States had per person health care costs that were at all comparable to those in other wealthy countries that it would be looking at long-term budget surpluses, not deficits.

It would have been worth reminding readers that Mr. Ryan has no evidence to support his assertions that the United States somehow has a fiscal crisis or that fixing our health care system would not address its projected long-term deficit problem. Readers might be mistakenly led to believe that Ryan's position has a basis in reality.

Ryan has previously pointed out that healthcare is the major driver of deficits.

More government run healthcare would help lower costs (and likely improve outcomes), so it would be a good thing for Obama to support more government run healthcare.

+1

The Republican solution to rising health care costs....written by The BPI Squirrel,
January 28, 2013 8:08

The Republican solution to rising health care costs is to make individuals pay more for their own health care. Their theory is that Americans simply buy more health care than they need, because insurance pays for services at the time of purchase. If people had to pay-as-they-go for health care, the GOP theorize, fewer people would go to doctors ... and voila! ... health care cost growth contained.

Of course, that means a lot of hardworking Americans dying of easily treatable conditions, but don't fret the details....

+6

...written by Chris Engel,
January 28, 2013 8:14

I could barely control myself when watching the MeetThePress interview.

I can't believe how he got away with spewing outright lies. And when he was confronted with the fact that he was advocating austerity, he bumbled around the response and was not challenged at all.

He also kept talking about balancing the budget, without saying ANYTHING about the dollar as a reserve currency leading to a Current Account deficit, thus creating a need for the private sector to run a deficit, which maybe Americans wouldn't feel so thrilled about...

I can't even watch any of the TV crap or read most of the mainstream papers, it's scary how economically illiterate everyone is out there, especially policymakers.

Our solution lies within. Apparently there is going to be another Reaganesque citizenship movement for the undocumenteds. Bringing 11 million folks into social security and tax paying, out of the underground economy, will do wonders. Plus, having the previously undocumented competing for legitimate jobs, such as in health care, will get these costs down as Dean has wished. It might make the cost of landscaping and housework go up ;)

+1

markets are always rightwritten by john,
January 28, 2013 12:00

I do not think much of Ryan on this issue or just about any other. But, I really think it is ridiculous to try to defend Obama's stance by saying: "look the markets agree with him".

The markets did not see the rather obvious housing/credit bubble in 2007; I do not know why Mr. Baker, of all people, is repeating the tired Paul Krugman line about how the bond markets do not see a problem therefore there must be no problem.

-1

Execess pays for execs at bailed-out firmswritten by James,
January 28, 2013 3:53

It also would have been useful to remind readers that Representative Paul Ryan's:written by H-Bob,
January 28, 2013 3:56

revised budget plan does not balance the budget for at least 20 years, even with his "assumption" that taxpayers would not take advantage of his proposed tax cuts. And also that his initial budget plan that the punditocracy deemed "serious" did not balance the budget for 40 years !

+1

maybe you should mention...written by Joe,
January 28, 2013 4:13

That the US govt doesn't actually borrow money. It's an asset swap from cash or reserves to bonds. What else are the people holding reserves gonna do with them? They could purchase another investment, but then someone else would have the cash (yes, I'm being loose with terminology, cash and reserves aren't exactly the same, but close). At some point, someone thinks it's better to have an interest bearing asset, treasuries, than a non-interest bearing asset, cash. And treasuries will be purchased at whatever interest rate the Fed sets.

+2

The lesser of all evils ...written by David,
January 28, 2013 4:24

Maybe john is right? There's no worse investment than Treasury bonds, except for any of the other investment options. So that's why everybody has driven the rate down to 0%?

+1

...written by Chris Engel,
January 28, 2013 4:28

The markets did not see the rather obvious housing/credit bubble in 2007; I do not know why Mr. Baker, of all people, is repeating the tired Paul Krugman line about how the bond markets do not see a problem therefore there must be no problem.

by john

You're kidding right? Look at the Case-Shiller index up to 2007, you can clearly see it outpacing inflation/population growth/gdp growth or ANY other rational models of what the price should have been.

The markets showed a major bubble there, the warning signs were all over the real estate and debt markets!

If Pres. Obama does NOT believe our debt to GDP ratio is too high,then hopefully he would agree to cut spending further and the economy will be allowed to grow. Just this once, hopefully Paul Ryan got it right.

Cut spending further and the economy will be allowed to grow? lol, as if "high spending" is is disallowing it from growing? I hope for your sake that your comment was a typo or something.

+2

Government spending? And crowding out private investment? written by David,
January 28, 2013 8:00

john thinks government spending is keeping the economy from growing, but the figures say 'no' to that. Here is private investment: Do you see where government spending is crowding out private investment? Me either.

+2

...written by joe,
January 29, 2013 5:14

The deficit was reduced 200 billion in FY 2012 (1.3T to 1.089T) and the 10 year bond is trading at a negative real interest rate. There is no fiscal crisis.

Republicans chose to talk about health care inflation in terms of entitlement spending. This allows them to push for cuts to entitlements.

+0

Clarifying semanticswritten by Nassim Sabba,
January 29, 2013 5:29

"it is a fact that if the United States had per person health care costs that were at all comparable to those in other wealthy countries that it would be looking at long-term budget surpluses, not deficits."

May I respectfully suggest adding /healthy (i.e. other wealthy and healthy countries each time we speak of this comparisons. People in France and Denmark are not expiring on hospital steps, like they do some places closer to home.